Credit card cap at 10% would hit up to 159 million US cardholders, warns ABA

A projected national ceiling of 10% connected recognition paper involvement rates could sharply bounds entree to revolving recognition for US consumers, according to caller figures from the American Bankers Association (ABA).

The commercialized assemblage said information supplied by paper issuers covering astir 75% of the marketplace indicates that betwixt 137 cardinal and 159 cardinal existing cardholders would nary longer beryllium capable to usage their cards if the headdress took effect.

The findings are based connected an appraisal of the “10 Percent Credit Card Interest Rate Cap Act”, sponsored by Senators Josh Hawley and Bernie Sanders.

The ABA said the information shows that betwixt 74% and 85% of progressive US recognition paper accounts would either beryllium closed oregon look important cuts to their recognition limits nether a 10% yearly percent complaint cap.

It added that state-level patterns align with the nationalist picture, suggesting akin disruption crossed the country.

According to the association, the measure, portion intended to curb borrowing costs, would alternatively “effectively eliminate” recognition cards arsenic a day-to-day outgo enactment and cardinal liquidity root for tens of millions of Americans.

ABA president and CEO Rob Nichols said: “This caller information is clear: involvement complaint caps pb to less options, higher costs and reduced entree - particularly for those who tin slightest spend to suffer their recognition card.

“We impulse the medication and Congress to cautiously see the important harm a complaint headdress would person connected US households and the broader economy. This is not the solution to the affordability challenge.”

The ABA said the interaction would widen good beyond higher-risk borrowers. It expects astir cardholders, including those who regularly wide their balances, to look stricter underwriting, little limits, higher fees, reduced rewards and benefits, and less low-rate promotional offers.

The information indicates that among cardholders with VantageScores supra 600, betwixt 71% and 84% would spot their accounts unopen oregon their recognition lines sharply reduced.

The relation added that galore “super-prime” customers with VantageScores supra 780 would besides beryllium negatively affected.

The radical argued that a 10% headdress would yet harm affordability for astir households.

It warned of imaginable nonaccomplishment of entree to highly regulated paper recognition successful emergencies, pushing immoderate borrowers towards less-regulated and often much costly alternatives.

The ABA besides flagged the hazard of reduced user spending powerfulness and said tiny businesses and the wider US system could beryllium hit, noting their dependence connected astir $3.6tn successful yearly purchases made utilizing user recognition cards.